Swedish police say they believe they have arrested the suspected driver of a lorry attack in the centre of that killed four peopley.

"The person in question has been arrested as the culprit ... in this case the driver," police spokesman Lars Bystrom said on Saturday.

"Then, there can be other people who are associated with him, but we do not know that at the current time."

The man was in custody in a northern Stockholm suburb on Friday and was later arrested on suspicion of having committed a terrorism crime.

Police have found explosives in the lorry used in the attack in Stockholm, Swedish television said on Saturday citing multiple unnamed police sources.

A picture of a man wearing a white sweater and dark hoodie under a military green jacket, with dark stubble on his face, was being circulated by Swedish police.

Police released an image of a man wanted in connection with the attack (AFP)

"Sweden has been attacked. All indications are that it is an act of terrorism. Our thoughts are with the victims, their families and those injured," Swedish Prime Minister Stefan Löfven said in a statement.

"The Government is being kept up-to-date and is doing everything it can to assist the relevant authorities in their work. I encourage everyone to be vigilant and to pay attention to the information from the police."

Body-like forms covered by blankets were seen on Drottninggatan in central Stockholm where the lorry rammed the Ahlens department store, a Reuters witness said.

Following the attack, the Sweedish national rail company announced that all trains to and from Stockholm Central Station had been cancelled for the rest of the day.

An area of central Stockholm was cordoned off, and large numbers of police and emergency services were at the scene.

Norway police announced that airport police will be carrying weapons "until further notice" due to the attack in Stockholm.

On Friday, a fifth victim died after an attack last month in London in which Khalid Masood, a 52-year-old convert to Islam known to British security services, drove a car at high speed into pedestrians on London's Westminster Bridge before launching a frenzied knife assault on a policeman guarding the parliament building.

The Islamic State group claimed an attack in Nice, France, last July, when a lorry killed 86 people celebrating Bastillle Day, and one in Berlin in December, when a lorry smashed through a Christmas market, killing 12 people.